THE Human Resources Ministry reported that in 2016, 37,699 people were retrenched. This number is however, believed to be far higher, as companies only need to report retrenchments if they terminate more than six employees. Many employers circumnavigate this by dismissing employees in smaller batches.

This figure also does not take into consideration the many retrenchments that occur in SMEs such as smaller retail outlets and eating establishments who hire less than six people in total. If they are to be taken into account, some estimates put the figure as twice or even thrice the ministry numbers.

It isn’t only entry-level employees affected. A total of 65% of those retrenched last year were from the skilled and professional class. This problem is compounded as we produce these workers in increasing numbers each year.

This is roughly triple the rate in 2014 and is expected to grow this year.

While Socso in its present form covers loss of income due to personal or industrial accidents, retrenched employees mostly rely on the Employment Act, Industrial Relations Act or in the case where the employer or employee does not come under this Act, largely, the goodwill of the employer.

Which may not be much, given if there was sufficient goodwill, the retrenchment would not have happened in the first place.

The employment insurance scheme (EIS) proposed by the MTUC and is being put together seems quite promising.

It proposes 0.5% of the employee’s salary be put into a fund managed by Socso specifically for retrenchment benefits for close to 7 million employees.

It will be an added burden to employers, who do not seem too happy to pay for it. The Malaysian Employer’s Federation as well as close to a hundred trade associations have registered their discontent.

Employers should bear in mind however, that like EPF and Socso, it is a shared burden; their employees, too, would be taking a pay cut contributing to it.

And like Socso, they will not get to recuperate any unused contribution they have to it.

There are of course, concerns about abuse and mismanagement of the funds, which would not be entirely misplaced.

At an estimated collection of RM1.14 billion for the first year alone, it risks growing into the next scandal. After all, nearly every government-managed fund in Malaysia have managed to involve itself in a scandal, or five, every couple of years.

Perhaps a consolidated fund for all employee needs – retirement, insurance and social security – could be considered. The increased pool would allow it larger capacity and with it, larger, more diversified investment options, especially on a global scale, at a time where the Ringgit is of significantly lower value.

It could even include related funds like the Human Resources Development Fund.

To ensure transparency, representation from the private sector and interest groups should replace at least half of the government appointees, and be placed in decision-making positions and directorships, not merely consultants and advisors, as seems to be the practice now.

Perhaps it is also time to relook legislation pertaining to retrenchment. Courts in Malaysia have typically refrained from intervening in a retrenchment exercise as it would not want to be seen as hindering commercial democracy. Therefore stricter guidelines on when an employer is allowed to retrench would be welcome. The burden should be on the employer as hiring a full-time employee should fulfil a long-term business need that should not be allowed to change overnight.

The Employment Act should also be re-evaluated to include employees serving under a year as the retrenchment payout bands of five, ten and fifteen years seems rather impractical with today’s mobile job market. – June 26, 2017.

* Emmanuel Joseph firmly believes that Klang is the best place on Earth, and that motivated people can do far more good than any leader with motive.

* This is the opinion of the writer or publication and does not necessarily represent the views of The Malaysian Insight. Article may be edited for brevity and clarity.